Consider the Following Statement: "A Monopolistically Competitive Market in Which

question 62

Multiple Choice

Consider the following statement: "A monopolistically competitive market in which there are no entry barriers will have the identical long- run equilibrium as if the market were perfectly competitive." Is this statement correct?

• A)No,because firms in the monopolistically competitive market do not produce at an output level where MC = MR,as in perfect competition,which leads to a different price and output in long- run equilibrium.
• B)No,because firms in the monopolistically competitive market will not reach their minimum efficient scale as they would in perfect competition - the result is higher prices and lower output.
• C)Yes,in the absence of entry barriers,firms in the monopolistically competitive market will expand until they are producing at the minimum of their LRAC curves,just as in perfect competition.
• D)Yes,in the absence of entry barriers,new firms enter the industry until industry price and output are identical to perfect competition.
• E)No,firms in the monopolistically competitive market earn economic profits in the long run because they are facing a downward- sloping demand curve,whereas in perfect competition they earn zero profits.

Understand how interest rates affect optimal R&D spending for firms.

Understand marginal utility and its application in consumer decision-making.

Recognize the role of R&D spending in generating technological advances.

Distinguish between different forms of technological advances (product innovation, process innovation) and their economic impacts.

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Definitions:

Unstable Attribution

An explanation for behavior that shifts across time, context, or situations, suggesting inconsistency in how one attributes causes to events or actions.

Stable Attribution

A belief that causes behind a person's behavior are consistent and permanent over time, attributing actions to innate characteristics.

Global Attribution

The tendency to attribute the causes of behaviors or events to broad, general factors rather than specific situational factors.

Internal Attribution

The process of ascribing the cause of behavior to an internal characteristic of the actor, rather than to external factors.